I talked about investing in specific trackers when covering 5 thematic funds for the future. I now want to go a bit deeper into my top pick: investing in water.
6. My cafeteria plan: like a kid in a candy store
Last Updated on September 26, 2020 by Mr. FightToFIRE
Autumn has arrived! Not only is this the period where college and university kids start a new year, but it’s also the period where I have to choose my extra-legal benefits for next year.
Choosing my benefits is an enjoyable feeling: like a kid in a candy store with well-filled pockets. It’s so hard to choose. Just like in previous years, I can choose from a list of benefits that my employer made available at the beginning of next year.
While there is more choice, the big difference this time is that I have an unlimited gas card and an extra budget for a company car! Thanks to the very beneficial tax benefits it is something that can save you a bit of money in Belgium.
These seven extra benefits don’t come for free. I have a so-called cafeteria budget at my disposal. This budget is part of my salary and the thirteenth month.
In exchange for some of this budget that my employer takes per month, I can receive the benefits. The nice thing is that my employer provides these benefits at a discount resulting in a net benefit for the employer. Though this net benefit is not always calculated from the best market price (like is the case for the IT devices).
I have listed all the benefits I can choose this year here. The benefits my employer offers are very popular among most of my colleagues. Therefore, the offer this year remains unchanged.
Important to note is that these benefits are separate from the ones I already get like free public transport subscription to and from work. Free bike rental in Brussels, all kinds of vouchers, etc.
There is one more option besides the ones mentioned above: Cash. Cash is the obvious one. They pay any money I have left out as a regular salary.
With the contenders aligned, it’s time to decide. This was difficult in the past since I had didn’t plan on getting a salary car.
Now that my living conditions have changed and I’m standing on my own two feet I need a car for those more distant and heavier grocery trips. Especially visiting friends that live further away now that my circle of friends are also on their own and building their lives with their partner. It makes the choice a lot easier, to be honest.
The main “downside” a salary car has, is the big impact on my salary package. I can still use all the money I earn now that I have purchased a Brussels’ apartment. I prefer to keep the monetary “loss” to a minimum because of this. That’s why I decided to only get a salary car. This year I still had extra holidays, a first-class train subscription, and extra pension savings. This took about 200 euro gross from my gross salary.
A 600 euro car
With only a salary car and nothing else, I can limit the extra reduction in net salary to about 300 EUR if I limit the salary car budget to 600 EUR. I decided on this budget because it gives a bit of freedom on brand, model and options. The remaining net salary should still be a solid 2500 EUR. This is a reduction of 350 EUR compared to what I got until now.
The observant reader might have noticed 2500 – 2850 = 350 not 300. That 50 EUR is because of the loss of bike compensation, but I lost that already because I don’t have to bike to the train station anymore.
While this is just an estimation I will soon know if it holds. I will soon be able to make accurate estimations once we can make our choices final.
No pension savings
Out of all the options listed above, you might have noticed that there is one that could actually be intersting to continue: the pension saving.
While it sounds interesting is actually not the most optimal use of money. I need to put my money in an actively managed fund that is strictly regulated which results in subpar performance across the board. On top of that the costs are excessive. Running costs can go as high as 1.5% and entry fees of 3%.
Finally, in the normal scenario, the tax authorities charges my pension savings at 8% on my 60th birthday. By the normal scenario I mean pension savings contracts that were concluded before the age of 55, were not requested before the age of 60 and whose annual amount saved was not increased since the age of 55. If I request the amount saved before the age of 60, the tax that I must pay can be as much as 50%!
The reasons why I decided to do it till now are two fold:
- I could: I didn’t need the money and thanks to the extra benefit through my employer I got just a little bit more return.
- Diversification: the funds have to follow the following rules: invest up to 75% in shares or bonds, invest up to 20% in non-euro coins and invest up to 10% in cash.
The final decision
Now that I know where I want to put my money I have to decide on which brand and type of car. This is not easy as it really depends on my estimated budget (of 600 EUR) as well as the Benefit In Kind (BIK) I will have to pay. Both will have a huge impact on my finally net salary I will receive as of January 2020. I have a few brands and models in mind but I will use the coming weeks to cut the Gordian knot.